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EcOrganic
i
BEN 2012 GROUP 03
ECORGANIC Lot Pt 300,
Jalan Pulai Business Centre,
Simpang Pulai,
31300, Perak.
(Phone/Fax) 05-5323780
BUSINESS PLAN
ECORGANIC
BY
Chin Ying Huah
Choo King Yn
Liau Shi Wei
Oh Meng Gin
Tan Yee Wei
EMAIL:[email protected]
Business Plan prepared August 2012
By Chin Ying Huah, Choo King Yn, Liau Shi Wei, Oh Meng Gin, Tan Yee Wei
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Copyright @ 2012
ALL RIGHTS RESERVED. No part of this Business Plan may be reproduced,
stored in a retrieval system, or transmitted in any form or by any means, graphic,
electronic, mechanical, photocopying, recording, scanning, or otherwise, without
the prior consent of the authors.
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DECLARATION
We hereby declare that:
(1) This UBTZ3016 Entrepreneurial project is the end result of our own work and that due acknowledgement has been given in the references to ALL sources of
information be they printed, electronic, or personal.
(2) No portion of this Entrepreneurial project has been submitted in support of any application for any other degree or qualification of this or any other
university, or other institutes of learning.
(3) Equal contribution has been made by each group member in completing the Entrepreneurial project.
(4) The word count of this Entrepreneurial Project is 15,426 words.
Name of Student: Student ID: Signature:
1. Chin Ying Huah 10ABB00487 __________________
2. Choo King Yn 09ABB08949 __________________
3. Liau Shi Wei 10ABB06263 __________________
4. Oh Meng Gin 10ABB01716 __________________
5. Tan Yee Wei 10ABB00983 __________________
Date: 27 August 2012
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ACKNOWLEDGEMENT
First of all, we would like to thank Universiti Tunku Abdul Rahman (UTAR) for
giving us the opportunity to conduct this business plan. From this business plan, we
know that the importance of teamwork in completing the business plan. We have
applied all our knowledge and skills that we learned in University. It also gives us a
chance to expose ourselves to the actual business plan in business world.
We would like to express our sincere gratitude to our supervisor, Mr. Oon Kam Hoe,
for guidance and constructive comments as well as encouragements in carrying out
this business plan. The comments and encouragements of Mr.Oon Kam Hoe are
valuable for this business plan to help us to complete the business plan.
Besides, we would like to express our sincere thanks to our Entrepreneurial Project
Coordinator, Miss. Ng Yin Kuan for her valuable information and important advises
in this business plan. With the valuable information from Miss. Ng Yin Kuan, we are
able to complete this business plan successfully.
We have not forgotten to appreciate every parties or individuals who have provided
their help and cooperation during the period of our business plan. Their efforts will
not be forgotten by us.
Last but not least, we also take this opportunity to express our sincere thanks and
gratitude to our families for their mental support and help to assist us to succeed our
business plan.
Thank You.
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TABLE OF CONTENTS
PAGE
Copyright Page .....i
Declaration ...........................................................................................................ii
Acknowledgement .......iii
Dedication ....................iv
Table of Contents .............v
List of Tables ...xi
List of Figures .....xii
List of Financial Data..xiii
List of Appendices ......xiv
1.0 EXECUTIVE SUMMARY...1
1.1 The Opportunity ....................1
1.2 The Description of the Business .2
1.3 Competitive Advantage ......2
1.4 The Target Market ..2
1.5 The Management Team .....3
1.6 Brief Summary of the Financial Projections ................................................3
1.7 Description of What the Business Needs ..3
1.8 Exit Strategy for Investors .3
2.0 THE BUSINESS ..4
2.1 The Description of the Business ....4
2.1.1 The Name, logo and location of the proposed business .................4
2.2.1.1 Name of the company .4
2.1.1.2 Logo .............................................................................4-5
2.1.1.3 Location...............................................................................5
2.1.2 Nature of the business/ Products or services offer ..5-6
2.1.3 Company missions and objectives ..6-7
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2.2 The Opportunity .7-8
2.2.1 Problem to be solved or needs to be filled ..7-8
2.2.2 How the proposed business solves the problem or filled the needs.8-9
2.3 Competitive Advantages ...9
2.3.1 Description of the Business Model ...9-10
2.3.1.1 Government Support and R&D 10
2.3.1.2 Green Technology .11
2.3.1.3 Supply Chain- Value Added Process.11
2.3.1.4 Business Strategy..11-12
2.3.1.5 Value Proposition...12
2.3.1.6 Environment..12-13
2.3.1.7 Customer Segment.13
2.3.2 How the business will create sustainable competitive advantages...13
2.3.2.1 Product...14
2.3.2.2 Green Concept....14
2.3.2.3 Pricing...14-15
2.3.2.4 Expertise and technology adaptation.15
2.4 Current Status and Requirement...15
2.4.1 Projected Milestones15-17
3.0 INDUSTRY ANALYSIS .................................18
3.1 Industry Description ....................18
3.1.1 Industry Training .............................18-21
3.1.2 Industry Size ...21-23
3.1.3 Industry Attractiveness .....................24
3.1.3.1 Threat of New Entrance.....................................25
3.1.3.2 Bargaining Power of Buyers..............................................25
3.1.3.3 Bargaining Power of Suppliers.......26
3.1.3.4 Threat of Substitutes ..26
3.1.3.5 Competitive Rivalry...27
3.1.4 Potential Profit.......................27
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3.2 Target Market .27-29
3.2.1 Agricultural and Plantation Sector...27-29
3.3 Competitive Position within Target Market29-31
3.3.1 Company profile of Biodynamic Fertilizer Sdn Bhd ..31-32
3.3.2 Earthworm Fertilizer Company ...32-33
3.3.3 Company profile of CCM Fertilizers Sdn Bhd ...33-36
3.4 Blue Ocean Strategy ...36-40
3.4.1 First Tier (Current chemical fertilizer users) 40
3.4.2 Second Tier (Farmers/Estate owners) .....40-41
3.4.3 Third Tier (Household residents) ....41-42
4.0 MARKETING PLAN ................43
4.1 Product/Service Feasibility Analysis ...43
4.1.1Full description of the product or service offer 43-44
4.1.2 Concept testing ......45
4.2 Pricing Strategies ............45
4.2.1 First Stage Economic Based Pricing .....46
4.2.2 Second Stage Value Based Pricing 46
4.3 Channels of Distribution ....47-48
4.3.1 Direct distribution channel ...48
4.3.2 Indirect Distribution Channel .......49
4.4 Promotions and Advertising 49-50
4.4.1 Promotions Method .49-50
4.4.2 Advertising Method ..50
5.0 PRDUCTION PLAN/ OPERATION PLAN ...51
5.1 Manufacturing Process 51
5.1.1 Inbound .52
5.1.2 Categorizing ..52
5.1.3 Manufacturing ......52
5.1.4 Leaving .53
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5.1.5 Controlling 53
5.1.6 Packaging ..53
5.1.7 Storing ..54
5.1.8 Outbound ..54
5.2 Availability of Qualified Labor Pool .....54-55
5.3 Physical Plant ..56
5.3.1 Ground Floor 56
5.3.2 First Floor .57
5.4 Machineries and Equipments ..58
5.5 Names of Suppliers of Raw Material ..58
5.6 Quality Control ......58-59
5.6.1 Education and Training 59
5.7 Customer Support 59
5.7.1 Companys Website .59
5.7.2 Consultation Service 60
5.7.3 After-sales Service: Feedbacks 60
5.7.4 Transportation: Delivery ..60
5.7.5 Laboratory services: Research and Development/Product Testing...61
6.0 MANAGEMENT TEAM .62
6.1 Management Team ..62
6.1.1 General Manager ..63
6.1.2 Human Resource Manager ...63
6.1.3 Accounting and Finance Manager ....64
6.1.4 Marketing and Public Relation Manager ....64-65
6.1.5 Operation and Quality Control Manager ..65
7.0 COMPANY STRUCTURE, INTELLECTUAL PROPERTY, AND
OWNERSHIP ..66
7.1 Organizational Structure ..66
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7.1.1 General Manager ..67
7.1.2 Human Resource Department ..67
7.1.3 Operation Department ..68
7.1.4 Accounting and Financial Department ...68-69
7.1.5 Marketing Department ....69-70
7.2 Legal Structure .......70-71
7.3 Intellectual Property ...71-72
7.3.1 Trade mark ..71-72
7.3.2 Patent 72
8.0 FINANCIAL REPORT73
8.1 Capital requirement for the next 5 years .....73
8.1.1 Starting Cost .....74
8.1.2 Manufacturing Cost ......75
8.1.3 Office Equipment Cost .76
8.1.4 Miscellaneous Cost ...77
8.1.5 Startup Capital Available .....78
8.2 Overview of Financial Projection ..78-80
8.3 Pro Forma Income Statement for 5 years 81
8.4 Pro Forma Cash Flow Statement .82
8.5 Pro Forma Balance Sheet 83
8.6 Pay Back Period and Exit Strategy ..84
8.6.1 Exit Strategy .84
8.6.1.1 Liquidation 84
8.6.1.2 Transfer of Shares .84
8.7 Financial Ratios Analysis .......85-86
9.0 CRITICAL RISK FACTOR 87
9.1 Management Risks ..87
9.1.1 Lack of Business Skills and Experience .......87
9.1.2 Conflict between Partners 87
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9.2 Marketing Risks .87-88
9.2.1 Low Brand Recognition ..87-88
9.2.2 Cost of Advertising and Promotion Reduce the Competitiveness ...88
9.2.3 Rivalry among Competitors .88
9.3 Operating Risks ..88-89
9.3.1 Lack of expertise, knowledge and skills .88-89
9.3.2 Lack of technology ...89
9.3.3 Equipment and machinery breakdown .89
9.4 Financial Risks 90
9.4.1 Economic Risk 90
9.4.2 High Start-up Cost ... 90
9.4.3 Decrease in Account Receivable Turnover . 91
9.5 Intellectual Property Infringement . 91
9.6 Other Risks as Appropriate 91
9.6.1 Substitute Fertilizers 91
9.6.2 Customer Relationship 92
9.7 Contingency Plan 92
9.7.1 Risk Management .92
9.7.2 Marketing Alternative Plan 92-93
9.7.3 Operating Recovery Plan . 93
9.7.4 Financial Plan .. 93
9.7.5 Intellectual Property Protection ... 94
9.7.6 Other Contingency Plan .. 94
REFERENCES ....................95
APPENDICES .97
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LIST OF TABLES
Page
Table 2.1: Significant Milestone.16
Table 3.1: Agricultures contribution to the GDP; 1990 200919
(based on 1987 constant price)
Table 3.2: Amount of Imported Fertilizers from year 2004 to year 2008..20
Table 3.3: Competitive Analysis Grid for EcOrganic..29-30
Table 3.4: Comparison Table of Competitor within the Industry34-35
Table 7.1: Percentage of company shares71
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LIST OF FIGURES
Page
Figure 2.1: Logo of the company4
Figure 2.2: Business Model of EcOrganic.10
Figure 2.3: Fertilizer Consumption (kilograms per hectare of arable land)..22
Figure 3.2: Area Harvested with Commercial Crops in Malaysia.22
Figure 3.3: Porter Five Forces....24
Figure 3.4: Positioning Map...31
Figure 3.5: The Eliminate-Reduce-Raise-Create Grid..36
Figure 3.6: Strategy Canvas...38
Figure 3.7: The Three Tiers of Noncustomers...39
Figure 4.1: Direct Distribution Channel47
Figure 4.2: Indirect Distribution Channel.47-48
Figure 5.1: Manufacturing Process of Company...51
Figure 6.1: Management Team..62
Figure 7.1: Organization Chart..66
Figure 8.1: Source of fund.73
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LIST OF FINANCIAL STATEMENTS
Page
Financial Statement 1: Pro Forma Income Statement for the Year 2013-2017...81
Financial Statement 2: Pro Forma Cash Flow Statement for the Year 2013-2017..82
Financial Statement 3: Pro Forma Balance Sheet for the Year 2013-2017.....83
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LIST OF APPENDICES
Page
Appendix A: Companys Name Card....97-98
Appendix B: Location Map.99
Appendix C: Survey Form..100-101
Appendix D: Market research.102-104
Appendix E: Product Catalogue.105-106
Appendix F: Companys Website..107
Appendix G: Machineries and Equipment.108-113
Appendix H: Example of Inspection Form...114
Appendix I: Resume of Management Team...115-134
Appendix J: Financial Data135-136
Appendix K: Business Form..137-159
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EXCUTIVE SUMMARY
1.1 The Opportunity
In todays society, there are various types of chemical fertilizers existing in the
market. Generally, many people do not know about the impact and harmfulness of the
usage of chemical fertilizers on humans health and the environment. In fact, the main
disadvantage of using chemical fertilizers is causing pollution to the environment,
cause degradation to human health, and breakdown biological food chain system in
the long run. Thus, it contributes to the phenomenon of tragedy of common in our
livelihood society.
Therefore, we propose to set up a company which is producing organic fertilizer
through recycling the food waste generated from the daily consumption. The idea of
this business is to help in mitigating the degree of harmfulness of toxic chemical
impact on humans health system and preserving a wholesome ecosystem away from
the usage of chemical fertilizers in our livelihood.
Besides being friendlier to the environment, the organic fertilizers also helps to solve
the food waste problems created by the food industry and from our daily consumption.
Technically, the company is using food waste as main source of raw materials to
produce organic fertilizer. As the saying goes one mans trash is anothers treasure.
The business can practically turn trash into cash by using waste materials which are
generated daily from the food industry. This can greatly reduce the materials cost of
production. Therefore, the business enables to invest in various ecological research
and development through fund saving earned from the production.
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1.2 The Description of the Business
The business is transforming the food waste which is collected from the restaurants
into organic fertilizers. The organic fertilizers are environmental friendly and offer
better living standard to the society. The organic fertilizers are 100% chemical free.
1.3 Competitive Advantage
In Malaysia, we are the pioneer in the industry who embraces the green concept to
recycling the food waste to produce organic fertilizer for multi usage. Although there
are various types of chemical fertilizers in the market, our product is known to be
environmental friendly and economic cost effective to the public.
Organic fertilizer is an environmental friendly fertilizer which utilizes food waste as
the production ingredients. Indirectly, the business helps in decelerating the level of
food waste which leads to garbage dumpling and pollution problems due to improper
disposals. Since food waste is an ever growing problem aligned with the growing
numbers of the worlds population, the company shall have an infinite resource
available to manufacture such organic fertilizer.
1.4 The Target Market
At the initial stage, EcOrganics target market is mainly the agricultural and
plantation sector which is organic farmers. Apparently, agricultural and plantation
sector are the major customer who need enormous amount of fertilizers for their
productivity. Meanwhile, the company also tries to educate individual household and
other farmers to use organic fertilizer for their houseplants and plantations.
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1.5 The Management Team
There are five founders of EcOrganic Company. Five of the founder will be
appointed as the management team of the company. Mr. Chin Ying Huah will be
appointed as General Manager. Miss Choo King Yn will be appointed as Human
Resource Manager. Miss Liau Shi Wei will be appointed as Accounting and Financial
Manager. Mr. Oh Meng Gin will be appointed as Marketing Manager. Mr. Tan Yee
Wei will be appointed as Operation Manager. All the founders will collaboration and
shared the information between each others to perform the best to the business.
Brief Summary of the Financial Projections
For the total of RM225 000 capitals, EcOrganic will need 4.98 years to pay back the
capital. This payback period has also included the discount rate (Malaysia 2012
inflation rate) 0.014% at July 2012. Year 2 onwards, the profit constantly increases
and achieve payback period at the end of fifth year.
1.7 Description of What the Business Needs
Each founder will contribute RM35, 000 as startup capital in EcOrganic. The total
contribute will be RM175, 000 to set up the business. Each of the founders will have
20% of share in the business. The capital will use to purchasing the machinery and
also lorry.
1.8 Exit Strategy for Investor
Investors can exit from the business by liquidation of assets or sell of the shares.
2. THE BUSINESS
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2.1 The description of the business
2.1.1 The Name, logo and location of the proposed business
2.1.1.1 Name of the company
The name for our company is EcOrganic. It is a wholly organic products
retailer which sells organic fertilizers. The word EcOrganic comprise of the
word ecology and organic. It means that eco-friendly organic fertilizer that
designed to reduce the uses of chemical and move towards more natural
methods of production.
2.1.1.2 Logo
Figure 2.1 Logo of the company
The company logo is designed in a simple concept that directly reflects the
company unique identity. It shows that EcOrganic Company pays more
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conscious to environment protection which the company reprocesses the food
waste into eco-friendly fertilizer. It is an easily recognized and attractive logo
which gives people an impressible image. The colors chosen are mainly green
with nurturing a feel of nature, peace and environmental friendly. The
company logo will be printed on our companys name card.
2.1.1.3 Location
In early inception, the company will be located at Simpang Pulai, Perak. This
is because the reason that the location is highly accessible since Perak is near
to Penang, Kedah and Selangor. Besides, Ipoh is also famous to the delicacies,
which means the company can obtain a lot of food waste from suppliers.
Furthermore, the infrastructures provided in this area are more convenient for
the company to acquire raw material. Thus, it is very suitable for EcOrganic to
start the business at Simpang Pulai, Perak.
2.1.2 Nature of business/Products or services offer
EcOrganic is a company that produces organic and environmental friendly
fertilizer for the usage of agricultural sector. Extraordinary, EcOrganic does
not use chemical substances in the production but EcOrganic fully utilize the
food waste as the main ingredients in the production. As the increasing
amount of food waste that produced by the community, EcOrganic purchases
the production input from the local restaurants and transform it into a
completely safe and environmental friendly fertilizer. At the mean time, the
organic fertilizers are selling at a reasonable price because EcOrganic wishes
to create awareness to the citizens of being green to the environment apart
from profit making.
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Chemical fertilizers can cause significant harm to the public health and
environment very harmful because the chemical fertilizers cause the oxygen
levels to drop and directly pose risks to the aquatic life and other species when
the chemical fertilizers enter to the body of water (Natural Resources Defense
Council (NRDC), n.d.). This creates an opportunity for EcOrganic to create a
100% organic and environmental friendly fertilizer to encounter the public
health and environment problem.
In the early stage, EcOrganic is going to conduct a campaign to increase the
awareness of the customers and explain the importance and advantages of
organic fertilizer to the customers. During the campaign, EcOrganic is able to
create more business opportunities with the suppliers and customers.
Meanwhile, EcOrganic is going to conduct e-commerce to ease in retailing,
giving details and selling organic fertilizers through the internet in order to
ease and approach the younger generation. It is one of the cost and time
saving alternatives in promoting EcOrganic to the public.
2.1.3 Company missions and objectives.
Company Mission
EcOrganic is the leading organic fertilizer supplier transforming food waste
with a less pollution, environmental friendly and technological productivity
solution to stimulate the national economic growth and social health conscious.
Company Objectives
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To create an environmental friendly image in the agriculture industry by creating
organic products to the customers.
To be the favored organic fertilizer company for farmers by providing good quality
organic fertilizer.
To provide an exciting and supportive environment for employees to excel in.
To have responsibility in public with awareness for the Mother Nature and society we
deal with.
To educate consumers about the benefits of organic fertilizer.
2.2 The Opportunity
2.2.1 Problem to be solved or needs to be filled
One of the main industries in Malaysia is Agriculture. To grow the plant and
trees, fertilizer is the main thing and has been widely used. And to make it
even more cost effective, chemical fertilizer has been used. By using chemical
fertilizer, the effects are much faster than organic fertilizer and usually will be
seen during first or second week only. Furthermore, chemical fertilizer is
cheaper than organic fertilizer and can easily obtain which provide
conveniences to farmers. Sad things is most of the people do not see the harm
it does to the environment, its side effects. Chemical fertilizer is not eco-
friendly. It may help plant to grow, but the high level of unnatural will not
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build up the soil but oversaturated it and cancel the effectiveness of other
nutrients. Furthermore, most of the chemical fertilizer is acidity which when
used in excess will harm the microorganism and affects the soils pH which
directly adversely affects the growth of the plant. All of this will cause
pollution to the environment. When applied, not all chemical fertilizer is used.
Some will seep into the ground and carried into groundwater which links to
streams, rivers, lakes and ocean. These can contaminate the water supply and
affects the ecosystem.
At the other hand, one of the problems faced by Malaysia is the waste
produced. According to Global Environment Centre, currently, Malaysia has
been producing around 23 000 tons of waste with 45% of the waste is from
food waste which are half of the total food waste. This waste will be dump
into 176 garbage dumps where only 8 of the landfills is designed with modern
feature pollution control. Which means the other 168 dumpsites is not
properly designed to protect environment and might cause production of
flammable gasses and pollutants which will leach into water stream, according
to Dr Abu Bakar, 2010. If continuous, this will cause serious pollution
problem which greatly affect our environment.
2.2.2 How the proposed business solves the problem or filled the needs
EcOrganic produces an organic fertilizer which is environmental friendly and
give nutrient to the soil. Using EcOrganic organic fertilizer not only gives no
harm to the environment, it also enhances and gives nutrient to the soil for re-
growth purpose. In addition, organic fertilizer is not salty and acidity which
will bring harms and pollutes the environment.
At the same time, the company is using food waste to produce the organic
fertilizer. Doing so will decrease the total waste to be dump to the dumpsites
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which happens to be helping Malaysia Government to solve the waste issues
hence will provide better environment to the agriculture and a better GDP for
the country. EcOrganic also provides and creates better jobs opportunity for
Malaysian.
Apart from that, EcOrganics fertilizer also will preserve the wholesome of
ecosystem which will not break down the food chain of the ecosystem.
2.3 Competitive Advantages
2.3.1 Description of the Business Model
A start-up firm needs to have an appropriate business model to extract value
from an innovation. In different industries, a business person are using
different business model to generate value to the business. The business model
for the business is to produce the organic fertilizers by using food waste to
preserve green and healthy concepts into the society life.
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Figure 2.2 Business Model of EcOrganic
Source: Developed for the research
2.3.1.1 Government Support and R&D
The business is getting governmental support in terms of Research and
Development (R&D) to develop the new technology which is green
technology to produce the organic fertilizers. Besides, as the government is
supporting the Green Concept in Malaysia therefore the government
helps the business in delivering the green knowledge to the public regarding
the benefits of using organic fertilizers. This will be more easily for the
business to increase the awareness of Green Concept in Malaysia. With the
government support, the business has got the expertise to produce and test
the organic fertilizers before offering it to the agriculture sector.
Environment Government Support
and R&D
Green
Technology
Customer
Segment
Supply Chain
-Value Added
Process
Value
Proposition
Business Strategy
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2.3.1.2 Green Technology
The business is using green technology to produce the organic fertilizers. This
green technology creates the innovation value to the business. This green
technology is customized by the business to produce the organic fertilizers.
Besides, green technology can helps to reduce the level of pollution in
Malaysia.
2.3.1.3 Supply chain- Value Added Process
The business has created value added processes in the supply chain. The
first value-added process is increase in the productivity of the business
which means the business is collecting the food waste from the restaurants and
households and reprocesses them into the organic fertilizers. This helps the
business to save material cost. Besides, the value-added process also includes
the social value. The business is educating and delivering the green
knowledge to the society about the benefits and usage of the organic
fertilizers. In addition, the distribution channels are one of the value-added
processes. The business has involved in direct and indirect distribution
channels. The direct distribution is selling the organic fertilizers directly to the
end customers. However, the indirect distribution involves the retailers and
wholesalers which act as intermediaries to market and sell the product to the
customers.
2.3.1.4 Business Strategy
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The strategy adopted by the business is differentiation and low cost strategy.
These strategies create competitive advantage and added value to the business.
Besides, it offers a chance to the business to compete with other competitors
such as CCM. The pricing set by the business must be lower than the other
competitors. Setting low prices can be attained as the food waste which used
as the material of production is cheaper than the competitor. This can help the
business to save the cost of the business. In addition, the organic fertilizers
produced by the business are different from others. The unique manufacturing
process which transforms the food waste into organic fertilizers enhances the
quality and creates addition benefits to the fertilizers.
2.3.1.5 Value Proposition
From the green technology, government support and R&D, supply chain value
added process and business strategy creates the additional value to the
business. The projected business is to produce organic fertilizers for the
usage of agricultural and plantation sectors in communicating the Green &
Healthy concepts in the society daily life. This is able to enhance the living
environment and health of the society.
2.3.1.6 Environment
The organic fertilizers produced by the business create value to the
environment. Nowadays, the society is demanding for a healthier lifestyle
therefore the organic fertilizers produced by the business cultivate a better
living environment to the public. Thus, it fulfills the society needs. Besides,
the business is collecting the food waste from the restaurants and households
and reprocesses them into organic fertilizers and it helps the government to
solve the food waste problem. In addition, the organic fertilizers create a
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13
greener environment to the public. As the business is using food waste to
produce the organic fertilizers and does not incur chemical substances in the
production therefore the organic fertilizers are non-toxic and environmental
friendly.
2.3.1.7 Customer Segment
The business has categorized the organic fertilizers into few customer
segments. The first segment is the organic farmers because the organic
farmers are using the organic fertilizers for their plantation and agricultural
purposes. The second segment is the estate owner. The business is targeting
the estate owner because estate owners have large plantation therefore they
need large amounts of fertilizers to fertilize their land and plantation. The
third segment is the retailer and wholesaler because the retailers and
wholesalers act as an intermediarys person to help the business to sell the
organic fertilizers to the customers and expand market reach. The last segment
is the household residents. As going green is the emerging trend, household
residents tend to keep plants at home to preserve a better environment. Thus,
household residents will buy fertilizers to fertilize their plants and it creates
business opportunity to EcOrganic.
2.3.2 How the business will create sustainable competitive advantages
Based on the business model, EcOrganic has created the sustainable
competitive advantages which differentiate the business from the competitors.
The sustainable competitive advantages will be in terms of the products.
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2.3.2.1 Product
The business is the pioneer in Malaysia which is transforming the food waste
into the organic fertilizers. The organic fertilizers produce by the business
does not incur any chemical interaction therefore it is non-toxic and the
production yield from plantation is safe to be consumed. Besides, the organic
fertilizers are environmental friendly which do not harm the environment.
Furthermore, EcOrganic is able to help the government in solving food waste
problem in Malaysia and reduce the pollution level of Malaysia as food waste
is the main material of the production.
2.3.2.2 Green Concept
The business is using food waste to produce the organic fertilizers without
interaction of chemicals therefore it does not harm to the environment and
health. Besides, the business communicates the green concept and benefits of
organic fertilizers to the public. The public is able to contribute their effort in
preserving the environment by using organic fertilizers for their plantation and
agriculture purposes.
2.3.3.3 Pricing
The pricing of the organic fertilizers are lower compared to the other
competitors in Malaysia. This helps the business to gain competitive
advantage against the competitors. Besides, EcOrganic is able to create
attractiveness and educate the Green Concept to the public by setting the
price of the fertilizers low. Customers are more likely to purchase and try the
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organic fertilizers when there is a price reduction. In the long run, EcOrganic
is able to increase market share and position the Green Concept into the
mind of the customers.
2.3.3.4 Expertise and technology adaptation
The business has qualified expertise and technology to produce the organic
fertilizers. Besides, the company has collaborated with the R&D companies or
government agency such as Malaysian Agricultural Research and
Development Institute (MARDI) to work on the research. As the business
was given encouragement of the government and the involvement of the
government ease the business in developing new knowledge and technology.
Thus, it creates a competitive advantage to the business.
2.4 Current Status and Requirement
2.4.1 Projected Milestones
The projected milestones of EcOrganic will be prepared along with the
required achievements from the day we start the new venture throughout the 5
years time.
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Table 2.1 Significant Milestone
Year Activity Details
2012 Propose the project to the government and private agencies in order
to raise capital.
Renting of land.
Building factory and research laboratories.
Building supplier and customer base.
Purchase of equipments.
Recruitment of workers.
Commencement of business.
2013 Provide free campaign to the public to increase awareness.
Promote our products through advertisement and internet.
Achieve first years targeted revenue. (RM63200)
2014 Innovating new products from food waste.
Build better reputation and gain more market share.
Achieve second years targeted revenue. (RM94800)
2015 Acquire legal permits from government to export our products to
foreign countries.
Higher reputation in the industry.
Break even of the business.
2016 Plan for expansion in other states and countries.
Generate profit.
According to the projected milestones of EcOrganic from year 2012 to 2016,
proposal of the project will be presented to the government and private
agencies to raise capital for the business. Before commencing the business,
EcOrganic has to check the availability of land and lease a piece of land to
build the factory and research laboratories. Besides, EcOrganic will start to
seek for restaurants to supply their food waste and offer the organic fertilizers
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to the local agricultural farms. After estimating the supplier and customer base,
EcOrganic is able to decide the amount of machines to be purchased and
recruit employees to operate the machines to meet the required production.
After the overall preparations, the business shall commence.
In year 2013, EcOrganic will provide free campaigns to the public to increase
the awareness and seek for distribution channels such as wholesalers and
retailers. Meanwhile, EcOrganic will be promoting the products through
advertisement and internet. EcOrganic expects to achieve the targeted sales
revenue at 40%. In year 2014, EcOrganic planned to innovate more new
products from food waste and introduce to the market to gain higher
reputation and market share. EcOrganic foresees an additional 20% increment
in the sales revenue due to the new offerings.
In year 2015, EcOrganic planned to acquire legal permits from the
government to export the products to foreign countries. EcOrganic believes
that exporting the products may make great contribution to the growth of the
company and the economy of the country. By doing so, EcOrganic is able to
build higher reputation in the industry and the capital invested will be
recovered.
In year 2016, EcOrganic planned for an expansion in other states and
countries to increase the production. The company expects to make a profit
although expansion may incur additional costs.
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3. INDUSTRY ANALYSIS
3.1 Industry Description
3.1.1 Industry Trends
Agriculture is the foundation of a countrys economy. A significant role has
been played by the agriculture sector in the growth of Malaysia and continues
to create a major contribution to the national economy. Based on the gross
domestic product (GDP), it has grown progressively from RM 14.82 billion in
year 1990 to RM40.07 billion in year 2008. On the other hand, there is
significant change in the contribution of the agricultural sector from 18.7% to
3.8%from year 1990 to year 2008. According to the latest releases from
Department of Statistics Malaysia (2010), RM 3.8 billion is allocated in the
agriculture sector in year 2012.
As services sector is taking over manufacturing sector to be a contributor to
economic growth, agricultural sector is important as it increases the
income of farmers, fishermen, agro-based industries and guarantee food
supply in the nation remains sufficient.
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Table 3.1 Agricultures contribution to the GDP; 1990 2009 (based on 1987
constant price)
YEAR GDP RM million Agriculture* RM million
1990 79, 155 14, 821
1995 166, 625 17, 155
2000 209, 959 18, 062
2005 449, 250 35, 835
2006 475, 192 37, 769
2007 505, 353 38, 593
2008(p) 528, 804 40, 073
2009(f) 528, 860 39, 260
Sources: Economic Planning Unit, Ministry of Finance and Bank Negara Malaysia;
Malaysia Agricultural Directory and Index 2009/2010
*includes forestry and fishery (p) preliminary (f) forecast
Besides that, there is a growing preference where consumers preferred
food produced organically. This is because of the increase of
environmental consciousness brought thoughtful effect on the behavior of
consumer. As a result, green market is growing at a significant rate. This
shows that when there are more organic users in Malaysia, there will be
more demand on organic fertilizer from the farmers to produce organic
products.
In Malaysia, farmers have options on choosing chemical fertilizer and
organic fertilizer for the crops Organic fertilizer is one of the alternatives to
chemical fertilizer.
However, mineral fertilizers were used for more than 90 percent of the
fertilizers used in all types of farming system in Malaysia. The general
fertilizers for both imported and locally manufactured for use are urea,
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ammonium sulphate, phosphate rocks, potassium chloride, ammonium
phosphate, kieserite and other magnesium fertilizers, borate, potassium
nitrate, sulphate of potash, NPK compounds, NPK or NK blended and
mixtures of fertilizers (Sabri, 2009).
For imported fertilizers in year 2004, year 2005 and year 2006, the total
value of imported fertilizers was averaged around RM 2.5 billion. However,
the worth of the imported fertilizer increased drastically to RM 5.83
billion to RM 9.17 billion correspondingly when the price of fertilizers
increased in year 2007 and year 2008.
Table 3.2 Amount of Imported Fertilizers from year 2004 to year 2008
Year Value RM000
2004 2, 422, 120
2005 2, 350, 758
2006 2, 650, 861
2007 5, 835, 952
2008 9, 171, 000
Sources: Department of Statistics; FIAM and Industrys estimates
According to our former Chief Minister Datuk Harris, he is going for a
hundred per cent organic farming in his 3,000-acre Balung River Plantation.
Besides that, he said that organic food is the world trend now and organic
food consumer is rising significantly. As health issue has arisen in the society,
consumers now are looking for organic food that is more trustworthy and
healthy. Thus, this results in increase of demand in organic fertilizer by
agriculture sector such as farmers (Chong, 2009).
Organic fertilizer offers consumers chemical-free products which enable
healthier lifestyle which chemical fertilizer is unable provide. As research
shows that the attitudes of consumer and preferences for organic product is
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imperceptible. However, the results of the studies show that consumer have
positive attitudes towards organic products where one of the most common
mentioned reason for purchasing organic products was it is perceived as
healthier than conventional alternatives (Chinnici, DAmico & Pecorino).
Based on the FAO fertilizer and plant nutrition bulletin, Malaysia has
improved the usage of available organic wastes, organic farming and
integrated farming system. The demand of organic fertilizers is increasing,
especially on vegetable farms, for ecological factors and because of
consumer apprehension about hazards from mineral fertilizers (FAO, 2006).
3.1.2 Industry Size
The fertilizer industry in Malaysia is considered very large, this is because
the soils are highly leached infertile acid tropical soils and such fertilizer
application is important in Malaysian agriculture. Due to the rapid expansion
in crop production and large tracts of land are cultivated with perennial tree
crops such as palm oil where large quantities of fertilizers are required
annually to sustain high crop yields and ultimately profitability. Besides oil
palm, the other cultivations are rubber, cocoa, paddy, coconut, vegetable and
tobacco (Mattasan, 2008). The use of fertilizer has shown a steady increase
from 798.65 kilogram per hectare of arable land in year 2005 to 929.87
kilogram per hectare of arable land in year 2008.
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Figure 3.1 Fertilizer Consumption (kilograms per hectare of arable land)
Adopted from: Trading Economics
Figure 3.2 Area Harvested with Commercial Crops in Malaysia
Adopted from: FAOSTAT
798.65 859.53
984.36 929.87
0
200
400
600
800
1000
1200
2005 2006 2007 2008
Fertiler consumption ( kilograms per hectare of arable land)
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
Vegetable Paddy Palm oil Cocoa Coconut Rubber Tobacco
Area Harvested with Commercial Crops in Malaysia
2006
2007
2008
2009
2010
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Mineral fertilizer such as urea, ammonium sulphate, calcium ammonium
nitrate, potassium chloride, potassium sulphate and others are used by all
types of farming system in Malaysia. On the other hand, the use of organic
fertilizers in Malaysia has gained popularity due to the promotion by the
government for sustainable use and management of natural resources.
Furthermore, organic agriculture is identified as a niche market
opportunity for the vegetables and fruits. In order to reduce the usage of
chemical fertilizer, the government has put in effort to promote the recycling
and use of agricultural wastes. More recently, organic fertilizers fortified
with chemical fertilizers have also been marketed into the plantation crop
sectors (Sabri, 2009).
In addition, there are 165 organic farmers in Malaysia. The organic
farmers are located all around Malaysia. There are 46 organic farmers in
Selangor and Selangor has the highest number of organic farmers in
Malaysia. Followed by Pahang, Pahang has a total of 45 organic farmers. In
Johor, there are 24 organic farmers. Next is Negeri Sembilan with the
amount of 8 organic farmers. In Kedah and Sarawak, there are 7 organic
farmers in each state. There are 5 organic farmers each in Kelantan, Penang
and Sabah. In Melaka, there are 2 organic farmers. As the least, there is
only 1 organic farmer each in Perlis and Terengganu (Better Diet Islam,
2012). As a conclusion, the use of the organic product is dramatically
increases because the rising awareness of people concern about their health
and environment. Besides being friendlier to the environment, the organic
fertilizers will also help to solve the food refuse problems created by the
food industry and from our daily consumption.
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3.1.3 Industry Attractiveness
To determine the attractiveness of EcOrganics organic fertilizers in the
industry, the company has implemented the Porter Five Forces. The Porter
Five Forces contains threat of new entrants, bargaining power of the
buyers, bargaining power of the supplier, threat of substitutes, and the
competitive rivalry.
Figure 3.3 Porter five Forces
Source: Developed for the research
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3.1.3.1 Threat of New Entrants
This threat is considered as a low threat. This is because high value
technology is required to produce the organic fertilizers. Besides that, it
requires expertise skills, knowledge and experience in using the technology
to produce the organic fertilizers. Thus, it is very difficult to the
competitors to enter to the organic fertilizer industry.
3.1.3.2 Bargaining Power of Buyers
The bargaining power of buyers in the organic fertilizers is high because
chemical fertilizers are acting as a substitute product in the industry
whereby the customers are able to purchase either organic fertilizers or
chemical fertilizers. If the chemical fertilizers are much cheaper than the
organic fertilizers, the customers will choose the fertilizers. Thus, the
customers will not consider about the harmfulness of chemical fertilizers.
The customers such as the farmers focus more on the profits therefore
they are more likely to purchase inputs which incur lower cost. Besides that,
the customers may not be aware of the existence of the organic fertilizers and
the organic fertilizers are new offerings in the market. Therefore, the organic
fertilizers need time to position into the customers mind and accept by the
customers.
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3.1.3.3 Bargaining Power of Supplier
The bargaining power of supplier of the industry is low because food
waste which is used to produce organic fertilizers is considered as unwanted
materials that needed to be disposed by the restaurants therefore there is a lot
of restaurants to supply food waste to EcOrganics to produce organic
fertilizers. Meanwhile, EcOrganic is sourcing the food waste from the
household residents as well. Every restaurant and household is generating
food waste daily therefore there is large supply of food waste and it
lowers the bargaining power of supplier.
3.1.3.4 Threat of Substitutes
The threat of substitute of the industry is moderate because there are only
chemical and organic fertilizers in the industry. EcOrganics organic
fertilizers are able to compete with the chemical fertilizers. However, the
buyers can easily shift their purchasing power from EcOrganics organic
fertilizers to the chemical fertilizers which offered by the competitors.
There are customers who are not aware of the harmfulness of chemical
fertilizers towards health and environment and have less knowledge of
EcOrganics organic fertilizer therefore EcOrganics organic fertilizer easily
substituted by the chemical fertilizers. The customers tend to purchase the
fertilizers which are lower in term of price and easily to be found in the
market.
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3.1.3.5 Competitive Rivalry
The competitive rivalry of the industry is high because there are
competitors such as the chemical fertilizer company gives pressures to
EcOrganic. Although, the chemical fertilizer companies do not sell the
same products but they have created awareness to the buyers. In addition, the
customers have no awareness of the Green Concept. EcOrganic has to
spend on advertisement and promotion to create the awareness and educate
the Green Concept to the public in order to increase market share and
preserve the environment.
3.1.4 Potential Profit
According to Invest Perak Malaysia, food is one of the attractions of
Perak state towards local and also neighboring countries like Thailand to
come and taste the food. Perak, famous with its foods will surely produce
more food waste compare to other state which is EcOrganic will used it to
produce fertilizer. Hence, Perak also famous with its agriculture industry in
which is EcOrganics customer or user. The location of EcOrganic in
Perak also is very strategic which can get food waste from state like
Selangor and Penang, and also have customer at Kedah which is nearby
Perak.
3.2 Target Market
3.2.1 Agricultural and Plantation Sector
In the business plan, EcOrganic has targeted the agricultural sector as one of
the target markets. The agriculture sector that EcOrganic focused is the
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cultivation of vegetables, fruits and crops. Apparently, agricultural and
plantation sector are the major customer who need enormous amount of
fertilizers for their productivity. Meanwhile, the company also tries to
educate individual household to use organic fertilizer for their houseplants.
Besides, EcOrganic also targeted organic farmers as one of the target markets.
According to Better Diet Islam (2012), there are 165 organic farmers in
Malaysia. The organic farmers are located all around Malaysia. There are 46
organic farmers in Selangor and Selangor has the highest number of organic
farmers in Malaysia. Followed by Pahang, Pahang has a total of 45 organic
farmers. In Johor, there are 24 organic farmers. Next is Negeri Sembilan with
the amount of 8 organic farmers. In Kedah and Sarawak, there are 7 organic
farmers in each state. There are 5 organic farmers each in Kelantan, Penang
and Sabah. In Melaka, there are 2 organic farmers. As the least, there is only 1
organic farmer each in Perlis and Terengganu.
In addition, plantation owners or estate owners will also be one of the
target markets for EcOrganic. As the palm oil is used in large quantities in
every country, Sime Darby is one of the main suppliers that supply the oil
palm in representing Malaysia. According to Sime Darby Palm Oil Facts and
Figures (2012), China is the largest oils and fats consumer. Besides,
with the amount of 3,000,000,000 people in 15 countries, palm oil was the
oil consumed highest in year 2009. With the awareness of health conscious,
people are getting particular on the oil consumed. EcOrganic is able to
provide large amount of organic fertilizer to Sime Darby for their plantation.
Last but not least, household consumers that own small or big size plantation.
Many household consumers are having their own plantation at home
regardless small or big plantation. Some of them even have plants at
home for their own interest. They are one of EcOrganic target market as they
will need fertilizer for the plants. Therefore, EcOrganic needs educate them
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the importance of organic fertilizer and be the organic fertilizer supplier for
them.
3.3 Competitive Position within Target Market
Table 3.3 Competitive Analysis Grid for EcOrganic
Name BioDynamic
Fertilizer Sdn
Bhd
Earthworm
Fertilizer
CCM Fertilizers
Sdn Bhd
EcOrganic
Year of
Establish
2005 2004 1966 2012
Core
Business
Activities
Production
and sale of
organic
fertilizers.
Product
vermicompost
for all types and
sizes of projects
such as organic
farm, nursery
and golf causes.
Chemical
products and
applications.
Fertilizers and
advisory
services.
Pharmaceuticals
and healthcare
products and
services.
Production
and sale of
organic
fertilizers and
technical
advisory
services.
Market
Position
Market
Follower
Market Leader Market Leader New Entrant
Brand name
recognition
High High High Low
Price Moderate Moderate High Low
Sales
Promotion
Moderate Low Low Moderate
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Product
Quality
High High Moderate High
Quality of
customer
service
Moderate Moderate Moderate High
Source: Developed for the research
Overall, EcOrganic considers as a new entrant in the organic fertilizer industry. The
core business activities are producing organic fertilizers, selling organic fertilizers
and giving technical advisory services to the customers. Meanwhile, EcOrganic
serves the organic fertilizer industry with the highest possible quality at the lowest
price to increase the brand name recognition and market share. Besides, EcOrganic
also provide high quality of customer service such as giving advice, giving further
detail of the organic fertilizers and giving the instructions of the use of organic
fertilizers. As EcOrganic is a new company, it has more sales promotion to create
awareness to the public compare to other competitors.
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Figure 3.4 Positioning Map
Source: Developed for the research
3.3.1 Company profile of Biodynamic Fertilizer Sdn Bhd
Biodynamic Fertilizer Sdn Bhd was incorporated on 4th
August 2005. It is a
100% Bumiputra company and it was issued and paid-up capital of Rm1
million. The nature of the business is producing and selling organic
fertilizers. It offers a broad range of organic fertilizers which are marketed
under the company brand name BIODYNAMIC and with the
BIODYNAMIC THE LIVING ORGANIC FERTILIZER trademark. All
of the products are formulated and produced by a local Malaysian scientist.
The products are well suited to most commercial crops and are pesticide
free, safe and environmental friendly.
Low Quality High Quality
Low Price
High Price
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The major production sites are located in Selangor and Kedah. It has a
minimum total monthly production capacity of 4,000 tons fertilizer. The
company expected that the production capacity will be expanded when the
production site in Kedah operate at its full capacity soon. Besides, the
major customers are Sabah Land Development Board, Reco Bio-Tech Sdn
Bhd, and Denwell Technology Sdn Bhd, farmers in Cameron Highland,
Kedah and Selangor provinces. Biodynamic Fertilizer Sdn Bhd is also the
main supplier to Ministry of Agricultures main contractors through the
subsidiary company which is Serba Teguh Trading.
The mission of Biodynamic Fertilizer Sdn Bhd is to offer the highest
quality, most effective, natural and organic products for agricultural
industry. The company achieves this by sourcing the finest and purest
natural ingredients available, controlling quality standards throughout the
production process, continually improving and testing the products in
order to provide the customers consistent and superior results.
3.3.2 Earthworm Fertilizer Company
Earthworm was once a backyard earthworm breeding company. The
company started to venture into earthworm compost business in year 2004.
The objectives of the company are not just about making profit but desire to
venture into an environmental friendly industry from the day of
establishment. The commitment to environment preservation serves as the
main purpose of the company.
The company has been equipped with facility such as enclosed production
space to provide better temperature and humidity control. The company
uses time-tested and proven method to grow large quantities of
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earthworms. Besides, the company separates the vermicompost from the
earthworm by using both machines and hand.
The company is a full time and full service commercial vermicompost
farm. The company provides vermicompost for all types and sizes of
projects such as organic farms, nursery and gold causes.
3.3.3 Company profile of CCM Fertilizers Sdn Bhd
CCM Fertilizers Sdn Bhd is one of the divisions of Chemical Company of
Malaysia Berhad. The company manufactures and trades a complete range
of fertilizers for all crop needs. As the only fertilizer manufacturer in the
country to have been accredited with the prestigious SIRIM MS 49:2008
product certification and MS ISO 2008 process certification, and with a
large dealer network, the fertilizers are readily available to the customers and
agricultural community locally and neighboring countries (CCM Fertilizer
Sdn Bhd, 2012). The companys Cock Head brand (CHB) compound
fertilizer represents quality fertilizers. It is well known in the region
because of the guaranteed composition for its unique potassium nitrate
complex compound fertilizer which promotes efficient nutrient uptake by the
plant and manufactured under stringent quality control and assurance
standards. The company is well known in offering total solution for the
benefits of the customers. At the same time, the company has won several
awards such as NAfMA Best Practice Award 2005 and Winner of
Enterprise 50 Award 2006 (CCM Fertilizers Sdn Bhd, 2012). CCM
Fertilizers is the first compound fertilizer manufacturer in the country. It has
accredited with both SIRIM MS49 product certification and MS ISO
9001:2008 process certifications (CCM Fertilizer Sdn Bhd, 2012).
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Table 3.4 Comparison Table of Competitor within the Industry
Company Biodynamic
Fertilizer
Earthworm CCM
Fertilizers Sdn
Bhd
EcOrganic
Composting
Method
Turning unit
composter
Vermi-compost
farm
Chemical
process
EcOrganics Method
Function Aerobic
Digestion
Aerobic
Digestion
Granulation and
Chemical
Process
Anaerobic and
Aerobic
Digestion
Process:
Flow
Benefits - Promotes
healthy plants.
- Improves the
condition of the
soil.
- Increases
nutritional
content in
plants.
- Promotes
healthy plants.
- Improves
nutrients and
moisture of soil.
- Disease and
pest resistant.
-Promotes
efficient nutrient
uptake.
- Increases
potassium and
phosphate
availability.
- Ensures
consistent
nutrient
contents.
- Improve the
health and
productivity of
soil and plants.
- Balance up
soils pH reading.
- Better
absorption
system of plant.
- Food safety.
- Slow release.
- Odorless.
Start
Input
Turning + Decompostion
process
Output
End
Start
Input
Ingestion process
(Earthworm)
Output
End
Start
Input
Granulation + Chemical Interaction
Output
End
Start
Input
Compression process
Anaerobic Digestion
Aerobic Digestion
Output
End
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Price RM1.30/KG RM 1.30/KG RM1.50/KG. RM1.20/KG
Based on the table, the 3 major competitors in the industry are Biodynamic
Fertilizers, Earthworm and CCM Fertilizers Sdn Bhd. Biodynamic Fertilizers
and Earthworm are producing organic fertilizers but CCM Fertilizers Sdn
Bhd is producing chemical fertilizers. The competitors are composting the
waste and producing the fertilizers on their own way.
Biodynamic Fertilizers collect the waste materials and decompose it on a
piece of land while turning the waste materials from time to time to ensure
good aeration within the soil structure to carry out the aerobic digestion.
Besides, Earthworm collects the food waste and use large quantities of
earthworm to digest the materials and transform it into vermicompost
whereas CCM Fertilizers implement granulation process and add in
chemical substances to the fertilizers. However, EcOrganic integrates both
of the anaerobic and aerobic digestion in the manufacturing process.
The organic fertilizers offered by both Biodynamic Fertilizers and Earthworm
serve as the basic purpose which promotes healthy plants, improve the
condition of the soil, increase nutritional content of the plants and disease and
pest resistant. For the chemical fertilizers which offered by CCM Fertilizer
Sdn Bhd, it promotes efficient nutrient uptake, ensures consistent nutrient
contents and the fertilizers contain potassium and phosphate which are
chemical substances to promote plant growth.
However, EcOrganics organic fertilizers are able to balance up the soils ph
reading which create an ideal condition to enhance the growth of the
plant. Meanwhile, the organic fertilizers promote better absorption of plant.
Besides, slow release is another additional benefit which provides the plant
consistent of nutrient supply to maintain the nutrient level of the plant and
yield better production. By using EcOrganics organic fertilizers is able to
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36
promote food safety and low capital investment. The organic fertilizers are
transformed from the food waste and it does not contain any chemical
substances therefore the production yields from plants are safe to be
consumed. Nevertheless, EcOrganics organic fertilizer is able to maintain
the soil structure and enhance the nutrient holding capacity of soil. In the
long run, customers require lesser amount of fertilizers to replenish the
nutrient and it saves time and cost.
3.4 Blue Ocean Strategy
Figure 3.5 The Eliminate-Reduce-Raise-Create Grid
The eliminate-reduce-raise-create grid is one of the tools to creation of blue oceans.
This grid identifies the actions that needed to implement to be successful and pushes
EcOrganic to create a new value curve to the market.
Firstly, EcOrganic has to eliminate the interaction of chemical substances in the
manufacturing process to ensure the fertilizers are 100% organic, free from chemicals
and environmental friendly because going green is the emerging trend and the people
are more health conscious. Besides, EcOrganic has to reduce the fertilizer
Eliminate
Chemical substances
Raise
Price of organic fertilizers
Customer consultation
Reduce
Fertilizer complexity
Create
Benefits to the environment
Quality of health
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complexity to avoid causing any confusion to the customers about the fertilizers
offered.
Furthermore, EcOrganic penetrates the market by using economy pricing whereby
setting the prices lower than the competitors to stimulate the curiosity of the
customers and attract them to purchase and try in order to increase market share and
create awareness. However, EcOrganic has to raise the price of the organic fertilizers
after gaining the market share and building product and brand recognition in order
to create perceive value to the products. Customers tend to perceive high price
associates with high quality. Meanwhile, EcOrganic has to raise the quality of
customer service and provide more consultation to the customers to educate the
customers about the benefits and ways to use the organic fertilizers effectively.
Lastly, EcOrganic has to ensure the organic fertilizers create benefits to the
environment and quality of health because being environmental friendly is the
emerging trend and people are more conscious to their health. EcOrganic is able to
gain more market share by creating benefits to both environment and health which
are the major concern of the customers while making any purchases.
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38
Figure 3.6 Strategy Canvas
These factors are served as the key to promotion of fertilizer to the countrys
agriculture purpose. There are both organic and chemical fertilizers in the industry.
The price of the organic fertilizers is slightly higher than the price of the chemical
fertilizers. However, the benefits contributed by organic fertilizers are more than the
chemical fertilizers such as food safety, environmental friendly and low capital
investment. Recently, people tend to be more health conscious and environmental
friendly therefore such trend created business opportunities to the organic fertilizers.
People tend to value their health and environment rather than the price.
Besides, Ecorganic is able to implement above-the-line marketing to raise consumer
awareness in a crowded market and encourage the intermediaries such as distributors
and retailers to market the organic fertilizers to the public.
Apart from profit making, EcOrganic has to emphasize on the customer service to
build customer loyalty which results to repetitive purchases. EcOrganic organizes
agriculture expo to the public to educate the Green Concept and create awareness to
the market.
High
Low
The Strategy Canvas of the Malaysia Fertilizer Industry 2012
Organic Fertilizer
Chemical Fertilizer
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39
Furthermore, EcOrganic has to invent more innovative ways in producing the organic
fertilizers to stay competitive in the market and offers the most beneficial organic
fertilizers at a cheapest price.
Most of the firms offer the fertilizers to the agriculture sector such as farmers and
estate owners only. EcOrganic is able to expand its market reach by producing a
diverse range of fertilizers to meet all the customer preference and exploit new
market such as the household residents. In long run, EcOrganic not only build good
reputation in the agriculture sector but also to the household residents.
Figure 3.7 The Three Tiers of Noncustomers
Noncustomers are able to offer big blue ocean opportunities therefore businesses are
eager to discover them and turn them into their customers. There are three tiers of
noncustomers that can be converted into customers.
Third Tier
Secondary Tier
First Tier
EcOrganic Market
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3.4.1 First Tier (Current chemical fertilizer users)
The first tier of noncustomers is the closest to the fertilizer market. They
make minimal purchase of the industrys offerings which is fertilizer and
they are likely to shift to another alternative when it is available. However,
the frequency of purchases would multiply when added value is offered to
them. This tier of noncustomers is the current chemical fertilizer user.
Going green is the emerging trend in the market but most firms offer
chemical fertilizers which is harmful the environment and cause health
diseases. However, EcOrganic produces organic fertilizers to the agriculture
sector to substitute the usage of chemical fertilizers. The fertilizers are
setting at reasonable prices. The offerings of EcOrganic are able to assist the
users to preserve and cultivate a better environment as well as enhance the
health quality. These first-tier noncustomers can be converted into the
customers of EcOrganic because they are health conscious and
environmental friendly.
3.4.2 Second Tier (Farmers/Estate owners)
The second tier of noncustomers is people who refuse to use the industrys
offerings. These people either do not use or cannot afford to use the
current market offerings either farmers or estate owners. EcOrganic
promotes the organic fertilizers to the mass number of refusing
noncustomers through advertisement, internet and campaign. EcOrganic sets
up outdoor advertising such as billboard, brochures and transport
advertisement to create awareness to the public. Nevertheless, EcOrganic
organizes agriculture expo and welcome the public to participate to learn the
benefits and ways to use the organic fertilizers.
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Besides, EcOrganic advertise the organic fertilizers through internet.
Internet is able to reach larger number of noncustomers globally efficiently
and effectively. After conveying the organic fertilizers to the public
including noncustomers, EcOrganic provides free campaign for parties
who are interested to participate and learn more about the products.
EcOrganics personnel provide advice and guidance on the proper way to use
the fertilizers. Each of the attendants is given a pack of sample for free to
experience the product and encourage cultivating a greener environment.
3.4.3 Third Tier (Household residents)
The third tier of noncustomers is the farthest away from the industrys
existing customers. They are the undiscovered noncustomers that have not
been targeted or thought as potential customers by any of the firm in the
industry because their needs and wants are assumed to belong to other
markets.
Most firms offer the fertilizer either chemical or organic in large amount
because they are targeting at only the agricultural sector. Nowadays,
household residents tend to do gardening at home to have a green and
harmony living environment. This creates business opportunities to
EcOrganic therefore EcOrganic is offering new range of organic fertilizers
which is specifically for growing indoor and decorative plants in small
packages to ease the gardening chores of the household resident.
EcOrganic offers sales promotion and agriculture expo at the housing area to
promote the organic fertilizers to the household residents. The household
residents are more likely to purchase the organic fertilizers for their plant as
discounts are given. This approach is effective in reaching and capturing a
new market. In the long run, EcOrganic is no longer only offering the organic
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fertilizers to agricultural sector but also household residents. Thus, EcOrganic
gains additional market share compare to other competitors.
4. MARKETING PLAN
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Product/Service Feasibility Analysis
4.1.1Full description of the product or service offer
The name of our company EcOrganic is formed by Eco and Organic. It
formerly introduces the nature of our business and generates a brief idea to
the public about the products and services offered. EcOrganic produces 100%
environmental friendly and organic fertilizers. Organic fertilizers are
carbon based compounds that increase the productivity of plants. Organic
fertilizer provides various benefits over chemical fertilizers. These benefits
include the following:
Non-toxic food
Usage of organic fertilizers ensures that the food items produced are free
of harmful chemicals. Consumers who eat these organic products are less
prone to diseases such as cancer, heart stroke and skin disorders as
compared to those who consume chemical fertilizers.
Low capital investment
Organic fertilizers are able to maintain the soil structure and increase the
nutrient holding capacity of the soil. Hence, long term usage of organic
fertilizers is able to build higher nutrient level in the soil therefore it
requires lesser quantity of fertilizers in the future. As the result, farmers
are able to save more costs in the future.
Environmental friendly
Organic fertilizers are easily bio-degradable and do not cause
environmental pollution but chemical fertilizers contaminate land and
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water which is a cause of diseases for the human being, plant, animal and
insect species.
According to Forum Air Malaysia (2012), a study done in year 2011
reported that 22,793 tons of food waste is generated per day and it is
estimated to be 8,311,589 tons of food waste generated per year. This
study has driven EcOrganic towards the idea of producing organic fertilizer
using food waste. EcOrganic get the supply from the local restaurants and
produce to the usage of agricultural sector. The food waste that is collected
will be manufactured into organic fertilizers by biological processes or agents
such as microorganisms.
As the result of the production, our company is able to reduce the public
health problems which caused by excessive consumption of chemical
resulted from the usage of chemical fertilizers and contribute great effort in
protecting the green environment for the new coming generation. Meanwhile,
our company also makes great contribution in solving the food waste
problem which encountered by the government.
4.1.2 Concept testing
To evaluate the customers responses to EcOrganics organic fertilizer
prior before introducing it in the market, concept testing is used. Concept
testing is the method of using qualitative and quantitative method.
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According to the result of the survey made, EcOrganic discovered that
majority of the customers like and accept the idea of reprocessing food
waste into organic fertilizer. Based on the statistics from the survey made, 75%
of the people will consider buying the organic fertilizer.
Short interview were conducted with some of the respondents. The
respondents felt surprised and interested with the concept of reprocessing
food waste into organic fertilizer. Some of them promised to give full
support to try the organic fertilizer when it is launch in the market.
(Refer to Appendix D for the Result of Market Research)
Pricing Strategies
Due to the green product awareness still low in which will greatly affect EcOrganic
in producing organic fertilizer, the price for EcOrganic fertilizer need to be attractive
in order to gain some share in the market and sustain in the market and at the same
time increase the consumer awareness in green product. There are 2 stages in our
pricing strategies where at the first stage we are using Economy Pricing Strategies
and then followed by Value Based Pricing.
First Stage Economic Based Pricing
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In the pricing strategies, the marketing and promoting the product will be kept
to a minimum which means no frills low price which is RM 1.20 per kg. For
the first 5 years, the price will be set lower than competitor in order to firstly
gain market share and to win competing with competitor. Even for recession
time, economy pricing sees increase sales more than other strategies.
4.2.2 Second Stage Value Based Pricing
When EcOrganic have its market share, EcOrganic will change the pricing
strategies. Rather than putting low price, EcOrganic will set the price
primarily but not exclusively to increase the perceived value. As an organic
fertilizer manufacturer who uses waste to produce the organic fertilizer that
not only reduce pollution and harm to environment, but also enhance the soil,
EcOrganic has a healthy value. The price is set on how consumer perceived
the company value, successfully high when consumer perceived its value
higher and the opposite.
Channels of Distribution
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Figure 4.1 Direct Distribution Channel
Source: Developed for the research
Figure 4.2 Indirect Distribution Channel
Raw material supplier (Restaurant)
Suppliers
EcOrganic
Manufacturer
Buyer (Farmer)
Customers
Raw material supplier (Restaurant
Suppliers
EcOrganic
Manufacturer
Retailers
Household
Customers
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Source: Developed for the research
Distribution channel plays an important role in marketing strategies. EcOrganic
adopts two types of the distribution channels, which are direct and indirect
distribution channel.
4.3.1 Direct distribution channel
Direct distribution channel is where the company sells directly to final
consumers. It is a simple structure involving the suppliers, EcOrganic and
customers. Through direct channel, EcOrganic is directly sold or distributed to
the final customer (farmer) without any intermediaries. Hence, customers can
purchase EcOrganic fertilizer directly from the company. Direct distribution
system will offer greater efficiency and lower cost where it directly offers the
services to the customers without intermediaries. Furthermore, those
customers who purchase EcOrganic fertilizer in bulky amount would be
offered a cheaper price or discount.
Raw material supplier (Restaurant)
Suppliers
EcOrganic
Manufacturer
Wholesalers
Buyer (Farmer)
Customers
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4.3.2 Indirect Distribution Channel
Indirect distribution channel is where the company involves intermediaries in
distributing the products to customers. The indirect channels that uses by the
company are wholesaler and retailer. The wholesalers play an important role
in promoting our product to the public. Thus, the wholesaler will be appointed
to play an important role in distributing the product to the retailer at each state.
Besides that, retailers are the channel intermediary that sells mainly to
customers. Retailers is one of the most effective ways in promoting our
EcOrganic fertilizer as the retailer have good relationship with customer and
better understanding of customers need and want.
4.4 Promotions and Advertising
4.4.1 Promotions Method
Sales Promotion
The company can use sale promotion as the promotion tool to attract the
customers to purchase the organic fertilizers. This includes the
promotional discount and offering free gifts to the customers who buy the
organic fertilizers. The company implements sales promotion to increase the
sales volume and also want to build the customer loyalty. When the sales
volume increases, this can generate more profits. At the same time, with the
sales promotion, EcOrganic is able to be differentiated from the competitors.
The promotion method is to give the opportunity to the customers to try the
companys product for free. This is a good method to attract new customers to
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try the products before making the first effort to purchase the companys
products and service.
Sampling
As the business is newly established, the organic farmers and potential
farmers will not be easily switching their existing fertilizers to EcOrganic
fertilizers. Therefore, EcOrganic needs to give the sample of organic
fertilizers to the organic farmers and potential farmers to use at their
plantation and agricultural. Besides, this makes the customers feel confidence
to use the EcOrganic fertilizers in future. In the future the customers will buy
in bulk for their plantation and agriculture purposes when they have the
confidence with the organic fertilizers
4.4.2 Advertising Method
Campaign Awareness
In order to increase the awareness of the organic fertilizers, the company can
organize a campaign in rural agricultural areas such as Cameron Highlands to
educate the farmers about the benefits and ways of using the companys product
and services. Besides, the company invites the organic farmers and potential
farmers to the campaign awareness. This type of campaign increases brand and
product awareness. Furthermore, the company is able to participate in
Agricultural Expos around the country and hold a campaign there as majority of
the big farmers are participating these events. Large estate companies like
SimeDarby Plantation participates in these large farming events. During these
events, the company is able to show demonstration of the organic fertilizers and
communicate the benefits to the participants.
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5. PRODUCTION PLAN / OPERATION PLAN
5.1 Manufacturing Process
Figure 5.1: Manufacturing Process of Company
Inbound
Categorizing
Manufacturing
Leaving
Controlling
Packaging
Storing
Outbound
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5.1.1 Inbound
Food wastes are collected from various restaurants then transport back to
factory using lorry. Food wastes will then be placed and gathered at raw
material area before categorizing process. The purpose of gathering the food
wastes at one area so that it will be more convenient for the workers to move
the food waste from one area to another area. This can improve productivity
and effectiveness.
5.1.2 Categorizing
Food wastes will be moved from raw material area to the categorizing
machine during this process. Food wastes are separated and categorized to
remove solid wastes such as bones as it will affect the next process if it is not
removed. 3 4 workers will be responsible to remove solid wastes from the
food waste by hand picking those solid wastes.
5.1.3 Manufacturing
After food wastes are done categorizing, the food wastes will be placed into
the machines in manufacturing area. During this process, food wastes are
compressed into smaller particles to ease the digestion of bacteria and allow
more space for the incoming batch of food wastes. When the bacteria finish
digesting the food waste, what was left will drop down into container for
fermentation.
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5.1.4 Leaving
Containers that are filled with organic fertilizers will be taken to the leave on
area for fermenta